Studies Show Overtime Negatively Effects Businesses and Workers

Ending overtime has many unrecognised benefits.

  • Overtime reduces output

Overtime reduces productivity and negatively affects morale. Study conducted by Journal of Construction Engineering and Management showed overtime, hours over 40, reduced productivity by over 15 per cent. Study conducted by John Pencavel at Stanford University also highlighted similar trends, with longer hours correlating with increase absenteeism, health problems, and turnover. Overtime is used by businesses to reduce labour cost. However, the cumulative effect of overtime – loss of morale, turnover, re-training and productivity loss – amounts to a net loss for businesses.

  • Overtime creates antagonism.

Workers see overtime as a means to pay them less. If working hours were strictly enforced then employers would have to take on new employees, it would reduce the pool of available labour and increase the value of each worker; allowing workers to demand greater compensation or being offered better incomes due to employer recognition of worker scarcity. Overtime destroys this possibility as more hours reduces the need to take on new employees and helps to maintain a vast reserve labour pool. This reserve labour pool has dramatic negative effects: it signals to employers of job scarcity which allows them to pay less; it also intimidates the employed workforce as they face unemployment for requesting better working conditions.

  • Overtime indicates poor pay.

Regular overtime in industries with low job satisfaction is an indicator of low pay. Study conducted by IHS Markit for KPMG shows ‘5.75 million employees earning less than the Living Wage in 2018, up from 5.55 million in 2017’. As the minimum wage remains stagnant and employers fail to pay the living wage, workers are forced to abandon leisure time for overtime. Until the living wage becomes a minimum wage, overtime hours are likely to increase.